Encompass Announces Fourth-Quarter and Year-End 2000 Financial Results; Results In Line With Previously Announced Guidance
2001 Priorities Focus on Integration, Enhanced Sales Culture, Margin
Improvement and Cash Generation
HOUSTON, Feb. 20 /PRNewswire/ -- Encompass Services Corporation (NYSE: ESR), the premier provider of facilities systems and solutions in the United States, today reported financial results for the fourth quarter and fiscal year ended December 31, 2000 that were consistent with guidance previously issued by the company.
During the fourth quarter, on the strength of mechanical and industrial services, revenues increased 21 percent to $1.2 billion, compared to $961 million in the prior-year proforma period. Encompass reported net income available to common shareholders of $16.5 million, or $.25 per diluted share, compared to $19.1 million, or $.28 per diluted share, a year ago. Earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $83.3 million, compared to $83.5 million in fourth-quarter 1999.
For the year, revenues grew 20 percent, reaching $4.4 billion versus $3.6 billion a year earlier. Net income available to common shareholders totaled $59.4 million, or $.90 per diluted share, compared to proforma net income of $79.3 million, or $1.16 per diluted share for 1999. EBITDA of $310.9 million compared to proforma $333.4 million in the prior year.
As previously announced, fourth-quarter and year-end financial results were negatively affected primarily by the performance of 11 business units targeted for elimination because of chronic underperformance or strategic incompatibility. Four of these units have been sold, three have been merged into other Encompass operations, two have been shut down and two are pending sale.
Excluding these 11 units, Encompass would have reported EBITDA of $89.5 million and net income to common shareholders of $21.3 million, or $.31 per diluted share, in the fourth quarter; and EBITDA of $341.0 million and net income of $79.6 million, or $1.17 per diluted share, for the year.
2000 Highlights
"During 2000, we completed the initial phase of our integration to streamline our organization and become more efficient," said Joe Ivey, Encompass president and chief executive officer. "We eliminated business units that were a drag on the rest of the organization or did not fit our strategic profile. We also aggressively adopted a national branding program toward delivering Encompass to the market as a single, cohesive entity.
"We delivered on our key growth strategies of capitalizing on robust end markets such as high-tech and telecommunications, growing our national and regional accounts business, and increasing cross-selling and bundling of services."
Encompass realized revenue of approximately $500 million from customers in the data, telecommunications and high-tech end markets during 2000. Additionally, the company's revenue from national and regional accounts customers topped $400 million. The volume of work shared between business units totaled more than $50 million.
Priorities for 2001
"While we're proud of our operational achievements in the year since Encompass was formed, we still have work to do before we fully leverage our size and scope in the marketplace," Ivey continued. "2001 demands further field integration, a more efficient sales mindset and increased emphasis on developing our leaders."
The company's 80 electrical and mechanical business units are being consolidated into 22 regional units, each led by large, mature businesses with sophisticated infrastructure and strong leadership. This consolidation increases accountability and control, improves utilization of resources, and reduces selling, general and administrative costs at the business group level.
"Our phased integration plan is on schedule," said Ivey. "We have formulated the new structure in the electrical and mechanical groups, identifying those locations to be regional platforms, business units and branches. Our goal this year is to achieve regional consistency in accounting systems, project and service systems, policies and procedures, and employee benefit plans structure. After regional consistency is achieved, we will make these functions consistent within each of our business groups, and, ultimately, across the entire company. Some key, high-value processes -- including purchasing and national sales -- are currently being implemented toward total enterprise-wide application within the next 12 to 18 months. We believe that our new purchasing process, when fully implemented, can save us more than $20 million annually."
To increase the percentage of revenue realized from national and regional accounts, Encompass has recruited a national sales management team to help operating units identify large, multi-site customers likely to benefit from the company's broad geographic scope and comprehensive service offerings. This team is responsible for instilling a common sales process, sales force automation tool and sales training.
To develop the skills necessary to assume larger responsibilities and effectively lead the change required for successful company-wide integration, approximately 450 company employees will complete the 4-1/2-day Encompass Leadership Institute curriculum this year to enhance their decision-making, problem-solving and communications skills.
Encompass' financial priorities for 2001 are margin improvement and cash generation. New incentive plans reward the leadership at the company's operating locations for performing higher-margin work and for effectively managing working capital. "While we grew revenues 20 percent in 2000, our charge is to get more of the revenues to the bottom line," Ivey said.
Outlook for 2001
Reaffirming previously announced guidance, Encompass said it anticipates reporting fully diluted earnings per share of $.14 - $.16 and EBITDA of $68 - $70 million for the first quarter which ends March 31, 2001. For the year, the company anticipates reporting fully diluted earnings per share of $1.15 - $1.20 and EBITDA of $348 - $358 million.
"Our backlog at December 31 totaled $1.7 billion, compared to $1.5 billion at year-end 1999, with margins stable," said Ivey. "We continue to monitor economic conditions very closely. Some recent economic data suggests that the first half of the year could see more of an economic slowdown than previously anticipated. While this trend has not yet caused us to change our outlook, a continuing economic retreat would likely cause us to reassess our expectations for the year."
Webcast/Conference Call Information
The company will host a conference call and Webcast to discuss the results on Wednesday, February 21 at 10 a.m. EST. The Webcast will include a presentation by members of senior management.
To participate in the call, dial 1-800-218-0713 five to ten minutes before the call begins and ask for the Encompass Services conference. To view the presentation during the call, visit the company's Web site at www.encompserv.com at least 10 minutes prior to the call to pre-register, test connections and download any necessary complementary software.
Participants who do not wish to ask questions during the call are encouraged to listen to the audio and view the presentation via the Webcast, to avoid delays between the audio and video portion of the call.
A replay of the call will be available from Wednesday, February 21 at noon EST until Wednesday, February 28 at 7 p.m. EST. To access the replay, dial 1-800-405-2236 and use passcode number 814847.
The call and presentation also will be archived on the company's Web site. |
